U.S. tax law intended to nab billionaires who hide money in tax shelters is terrorizing middle-class dual citizens with no income south of the border

Pat (last name withheld by request) has applied to ‘relinquish’ her U.S. citizenship after living in Canada for the past 10 years.

Photograph by: Ric Ernst
, VANCOUVER SUN

Like many people in Canada who still have American citizenship, Pat is both scared and angry.

The semi-retired suburban Vancouver woman is trying to relinquish her U.S. citizenship because she feels unfairly snagged in an unprecedented American campaign to catch tax cheaters living outside the United States.

Beginning this month, Canada’s largest banks are being required by Ottawa to hand over to tax authorities the financial information of every client with American citizenship.

About a million people in Canada hold an American passport, and many are racing to figure out their options in response to Canada’s February decision to cooperate with the U.S. Foreign Account Tax Compliance Act, best known as FATCA.

Many dual citizens are rushing to accountants to file complex U.S. back-tax statements. Hundreds are also joining activist groups launching counter-assaults on FATCA, including one called The Isaac Brock Society, named after a Canadian leader in the war of 1812.

And many, like Pat, who will not agree to their full name being published, are trying to quickly become ex-U.S. citizens.

“It’s so outrageous,” said Pat, who became a dual citizen in 2008, after coming to Canada from New York to conduct medical research at the University of B.C.

This week Pat said many people in Canada who are still American nationals “are just kind of hiding underground. They’re scared of poking their heads out.”

Pat owns a condominium in White Rock, has some small Canadian investments and a mother and a son in the U.S.

She wants to file tax statements only in Canada, where she believes governments provide “great service” for the money she sends each year to Ottawa and Victoria.

Pat bitterly asks why Canadians like her, with modest incomes, are being swept up in a U.S. effort meant to target rich people hiding billions of dollars in offshore bank accounts and tax havens.

A prominent renunciation lawyer, Alex Marino of Calgary, says he has four to five people a week coming in to ask how to drop their U.S. citizenship. In a published paper, Marino adds that it is understandable people in Canada fear going public with their criticism of the U.S. tax department.

Pat is one of half a dozen people who have contacted the Sun over the issue. But none were prepared to be quoted unless granted anonymity, with many saying they live in “terror” of the long reach of the U.S. Internal Revenue Service.

Instead of each year hiring an accountant to fill out confusing U.S. tax forms simply to declare she has no investments or income that should be of interest to officials south of the border, Pat has quietly had her request sent off to "relinquish" her American citizenship.

But U.S. embassy officials put Pat on edge when they recommended she go further and “renounce” her U.S. citizenship. Pat is intimidated by the consequences of this bolder action.

Not only does “renunciation” cost $450 US, it will put her name on a list maintained by the FBI, which is normally used for monitoring criminals. It’s been dubbed “the list of shame.”

In addition, Pat said this week, renouncing citizenship requires “standing in front of the flag” at a U.S. consulate and proclaiming: “I hereby absolutely and entirely renounce my United States nationality together with all rights and privileges and duties and allegiance and fidelity thereunto pertaining.”

A McGill University law school international tax expert, Allison Christians, says the worry of people such as Pat is understandable. Among other things, anyone suspected of renouncing their U.S. citizenship to avoid paying taxes may be denied entry to the U.S.

Trustworthy figures on the number of U.S. relinquishments and renouncements are difficult to obtain. The U.S. State department has acknowledged more than 1,000 U.S. nationals gave up their citizenship in 2012.

But critics don’t trust the figures. They note the FBI, according to one report, pegged the number of annual renunciations in 2012 much higher than the State Department, at 4,500.

A spokesman for the U.S. Consul General’s office in Vancouver could not be reached.

The lack of reliable data about people who give up their U.S. citizenship has been noted as one of many problems by Canadian-based activist groups, including the Isaac Brock Society, Maple Sandbox and the Alliance for the Defence of Canadian Sovereignty.

Even though Pat is bitterly disappointed that Canada’s Conservative government “succumbed” to FATCA, and (like dozens of other countries) signed an agreement forcing its banks to cooperate or suffer severe penalties, part of her is not surprised: “The U.S. is a threatening country, both militarily and economically. I think it’s pretty scary for any country to stand up to the United States.”

B.C. New Democratic Party MPs Murray Rankin and Nathan Cullen are among those who say the Canadian government may have gone too far to accommodate FATCA, including by forfeiting a degree of Canadians’ sovereignty and privacy rights.

Pat is also worried about such larger moral implications. She has no intention to give up the battle against FATCA, even if she eventually obtains the all-important certificate showing she is no longer a U.S. national.

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